Pharmaceutical companies face ongoing cost pressures and the need to optimize the pharmaceutical value chain. As one component of that effort, strategies to improve the supply chain, inclusive of sourcing and procurement activities, are important. To offer insight into this area, Gregg Brandyberry, CEO of Wildfire Commerce, senior advisor of AT Kearney procurement and analytic solutions, and former vice-president of procurement of global systems and operations for GlaxoSmithKline (London), discusses collaborative innovation in procurement and sourcing between pharmaceutical companies and their suppliers with Patricia Van Arnum, senior editor of 

. Brandyberry will be a speaker at the upcoming 

DCAT/ISM Sourcing Summit 2010: Forward Thinking Sourcing

, an educational program presented by the Drug, Chemical, and Associated Technologies Association (DCAT), along with its partner, the Pharma Forum and Chemical Group of the Institute of Supply Management (ISM). The program will be held Nov. 3 and 4, 2010, in New Brunswick, New Jersey. 

: In discussing supplier-customer relationships, you have used the term ‘collaborative innovation?’ What do you mean by that term and how does it support or differ from supplier relationship management? How is it different or supportive of traditional supplier metrics that may be used in an outsourced relationship?

: Collaborative innovation is a new style of working that removes many of the traditional boundaries associated with improving current states and, more importantly, with real ideation. Individuals across functions, companies, geographies, and even competitors, are bounded together by the objective of achieving a common goal.  Information, ideas, and work in process are shared freely among the participants. Significantly less formal governance structures are needed as collaborative innovation  groups are committed to operating with honest, ethical, and transparent principles. 

 Two major enablers make collaborative innovation an exciting and forward-thinking methodology to adopt. The first enabler is based on the ground-breaking work of the great systems thinker, Russell L. Ackoff, PhD, who developed the approach called ‘idealized design’ while working with Bell Labs in the early 1950s, and more recently the work of the modern-day practitioner, Jason Magidson, PhD, director of customer care for NextDocs and formerly director of innovation at GlaxosmithKline. 

Idealized design is based on the following concepts: design by users; eliminating constraints (i.e., pretending the current system was destroyed last night); and starting with the ideal and working backward to today by identifying a clear roadmap toward obtaining the ideal. Practitioners of idealized design have a long history of achieving real breakthrough versus those practicing continuous improvement.  Idealized design focuses on ‘starting from scratch,’ whereas continuous improvement typically ‘tinkers’ with what exists today. As Ackoff so aptly stated: ‘All of our problems arise out of doing the wrong thing ‘righter’. The more efficient you are at doing the wrong thing, the ‘wronger’ you become. It is much better to do the right thing ‘wronger’ than to do the wrong thing ‘righter’.’  

The second enabler is technology and the ability to easily transmit and store data. Technology, now including social media and mobile platforms, significantly increases our collective ability to transform data to information to knowledge to understanding and ultimately wisdom, another Ackoff model.

In contrast, supplier relationship management can be defined as a discipline of working collaboratively with a group of suppliers that are thought to be critical to the ongoing success of an organization or corporation. Supplier relationship management is intended to maximize the value coming from those supplier relationships. Some of the key process steps include: supplier segmentation (i.e., to ensure the right suppliers are picked), accountability (i.e., who owns the relationship), governance (i.e.,how all parties are to act), resourcing (i.e., making sure dedicated bodies are involved), and metrics (i.e., asking if there is value being generated). Although these intentions are admirable, few organizations or corporations have the skill sets to do this effectively, and unfortunately, supplier relationship management becomes another ‘tick box’ approach that typically provides little significant real benefit to either the buying organization or the supplier. Unfortunately, supplier relationship management often becomes one more bureaucratic management technique. While it is completely agreed that there should be some structure to ensure that critical suppliers provide maximum benefit and that the benefit is mutual between both parties, it is also strongly suggested  that collaborative innovation  be widely adopted within the framework of supplier relationship management.

 Can you provide some examples of models or specific programs using collaborative innovation in the pharmaceutical supply chain? 

: Little is being done within traditional pharmaceutical supply chains (i.e., the movement of materials as they flow from their source to the end customer, including purchasing, manufacturing, warehousing, transportation, customer service, demand planning, supply planning, and supply-chain management), with the exception of some anecdotal efforts in forecasting, logistics, and certain supplier programs.

Two examples within research and development (R&D), however, do come to mind. The first example was a project undertaken by GlaxoSmithKline’s procurement and R&D organizations to collaboratively develop a new type of test equipment using idealized design. A second example was a way to deliver more value, faster at a reduced cost by using classic collaborative innovation sharing among major competitors.

In the first example, in 2007, GlaxoSmithKline engaged 60 scientists and a supplier in an idealized-design process to design equipment for testing how potential medicines dissolve into the human body (e.g., peak concentrations, durations). This collaborative innovation process resulted in a breakthrough design that helps to shorten the R&D cycle, improves testing quality, and enhances productivity by freeing scientists to work on other things because the equipment requires less monitoring. 

In the second example, driven by revenue loss due to key patent expiry, dramatic declines in pipeline productivity, and price-control strategies by government and health maintenance organizations (HMOs), pharmaceutical companies such as Merck & Co., Eli Lily, Pfizer, GSK, and Johnson & Johnson either are currently participating or planning to participate in ‘precompetitive consortia.’  Precompetitive consortia are based on collaborative innovation principles where information is shared openly with all parties in an environment of trust to advance new process or product design at the stages before actual competitive products are produced.

Considering that a substantial amount of prior discovery has been serendipitous discoveries (e.g. penicillin, chlorpromazine, Retin-A), it is great to see R&D adopting methodologies that can advance the process of ideation.

: As a whole, how would you evaluate the pharmaceutical industry’s position in adopting more advanced supply-chain practices? Are there other industries in which you think are more advanced and can provide best practice approaches for the pharmaceutical industry? 

: Having worked in other industries including industrial, consumer products, electronics, and automotive, I think I can accurately say that with the exception of procurement, the pharmaceutical industry is not known as a leader in advancing supply-chain practices. I was responsible for programs related to automotive, industrial and electronics manufacturing in the early 1980s through the late 1980s that were advancing statistical process control, Lean manufacturing, Six Sigma, and manufacturing resource planning (MRP II). In general, the pharmaceutical industry has been 10–20 years behind other industries. There are many examples of supply-chain leadership in industrial, consumer products, electronics, and automotive, such as Wal-Mart, Sony, Toyota, and Zara. 

Procurement, however, is the exception. I had the great opportunity to work for a decade for the modern procurement transformation pioneer Willie Deese (now president of Merck Manufacturing) and later for Joe Meier, currently chief procurement officer for GlaxoSmithKline. GlaxoSmithKline and Merck are examples of the very best procurement organizations not just in the pharmaceutical industry but across all industries.

: In what segments in the pharmaceutical supply chain do you see opportunity for more collaborative models?  

: No doubt there are many, many opportunities throughout the supply chain for opportunities to do a better job of collaborating. One of the most advanced and exciting collaborative models I have seen recently is a procurement-led methodology called collaborative optimization, which I have been involved with in my capacity as senior advisor to AT Kearney Procurement and Analytic Solutions. Collaborative optimization is used to optimize the supply base and even parts of the supply chain when complex arrays of suppliers, supplier capabilities, specifications and/or geographies exist. It is very different than traditional strategic sourcing in that, instead of focusing on achieving the perceived best price/cost/value delivery by pitting supplier against supplier, collaborative optimization combines detailed purchase price–cost analysis (i.e., cost breakdown), expressive bidding (i.e., allowing suppliers to bid on configurations that play to their strengths and also to bid creatively) with combinatorial optimization that can rapidly evaluate a multitude of potential scenarios and constraints finding the least costly solution that satisfies the buying organization’s requirements. With this methodology, suppliers and buying organizations can have significant mutual gains.

: What are some barriers or limitations facing suppliers in forwarding more innovation or collaboration? What are the barriers/limitations facing the sponsor company in this regard? What are some strategies for improving collaboration or innovation?

Significant barriers do exist for the following reasons:

• True collaborative innovation requires a step-change in thinking.  The idea of working openly and sharing information in a highly transparent environment with little traditional governance just doesn’t fit very well in most of today’s corporate environments. 

• There is most definitely a lack of skill sets by both the supplier and the buying organization. This problem is especially true if the buying organization’s procurement organization is leading the effort with the supply base. Even today, most procurement professionals pride themselves on their ability to leverage price down. Although this is not a bad thing, it’s not very effective when it is the common process adopted for every supplier engagement.  

• Most often some investment needs to be made to have the right technology, the right skill sets, and the right overall solutions in place that help to facilitate the collaborative innovation process. Most companies are not willing to make the investment necessary to support real innovation processes. Instead, they assign people with inadequate skill sets to match up with equally unskilled collaborators on the supplier side of the equation (great technical people often are not great collaborators). Again, there are notable examples of those who do it right and have made the proper investment. One which comes to mind is the highly successful collaborative strategic supplier program under the direction of DK Singh, chief procurement officer at Conagra, which drives innovation to the delight of the head of research and development.

Articles

Sourcing

Gregg Brandyberry, CEO of Wildfire Commerce, senior advisor of AT Kearney procurement and analytic solutions, and former vice-president of procurement of global systems and operations for GlaxoSmithKline, discusses collaborative innovation in customer-supplier relations.

Collaborative Innovation in Sourcing and Procurement

Sustainability, defined to include corporate economic, environmental, and social performance, is the root of a company’s corporate social responsibility (CSR) programs and activities. Sustainable Asset Management (SAM), a boutique investment firm focused on sustainability investing, and Dow Jones Indexes, a provider of global indexes recently released the results of their annual global analysis of corporate sustainability leadership, the Dow Jones Sustainability Indexes (DJSI). The evaluation involved multiple market sectors, including pharmaceuticals and biotechnology. 

The DJSI is based on an analysis of corporate economic, environmental, and social performance by assessing factors such as corporate governance, risk management, branding, climate-change mitigation, supply-chain standards, and labor practices. It accounts for general as well as industry-specific sustainability criteria for each of the 57 sectors defined according to the Industry Classification Benchmark (ICB). ICB is a classification system of the Dow Jones Indexes and the 

 Stock Exchange (FTSE). The system is supported by the ICB Universe Database, which contains more than 60,000 companies and 65,000 securities worldwide from the FTSE and Dow Jones Indexes.

Roche (Basel, Switzerland) was name the sector leader in the pharmaceutical industry according to the 2010 results of the DJSI, which were released in September 2010. The DJSI evaluated 56 companies. Roche has been included in the DJSI (world index) since 2004 and was named the sector leader also in 2009. According to a Roche press release, Roche’s activities in the area of sustainability include decreasing its carbon footprint by reduction of energy consumption and improving energy efficiency. Other activities include involvement in local community charitable initiatives, remuneration, and benefit programs to recognize the value of its employees as well as to bring medically valuable and sustainable healthcare products and services to patients on a global basis

Also, named to the sustainability index were Abbott (Abbott Park, IL), AstraZeneca (London), CSL (Melbourne, Australia), Daiichi Sanyko (Tokyo), Eisai (Tokyo), GlaxoSmithKline (London), Johnson & Johnson (New Brunswick, NJ), Merck & Co. (Whitehouse Station, NJ), Novartis (Basel, Switzerland), Novo Nordisk (Denmark), sanofi-aventis (Paris), and Takeda (Osaka, Japan). Each of these companies was recognized in the DJSI on a worldwide basis and in the respective region in which the company is headquartered (i.e. United States, Europe, and Asia Pacific).

The DJSI evaluated 22 companies in the biotechnology industry and named Novozymes (Copenhagen, Denmark), a provider of enzymes and related technology. Novozymes led the biotechnology between 2000 and 2007 and again in 2009, according to a company press release. Novozymes earned an overall score of  84%, measured across 23 performance criteria, according to the company. Novozymes scored 100% for the company’s record in three out of four categories measuring environmental performance. It also scored well in stakeholder engagement and human capital development (both 100%) and customer relationship management (89%). Novozymes was recognized globally and in the European rankings. 

Other biotechnology companies recognized in the DJSI were Biogen Idec (Cambridge, MA), Genzyme (Cambridge, MA), and Life Technologies (Carlsbad, CA), which provides tools and services for the biotechnology industry. These companies were recognized globally and respectively in their regional markets. Crucell (Leiden, The Netherlands) was recognized in European rankings.

CSR and Sustainability Forum

An annual analysis rates the performance of pharmaceutical and biotechnology companies in corporate sustainability.

Roche Gains Top Spot in Sustainability Among Pharmaceutical Companies

On Sept. 20-22, 2010,  world leaders met at the United Nations (UN) in New York City to discuss the progress made and near-term strategy for achieving the Millennium Development Goals (MDGs), a set of eight major antipoverty and global health goals.  The MDGs were adopted in 2000 by 189 UN member states and provide a framework for focus and accountability by setting international development objectives, including  objectives in global public health. With five years remaining for the timetable to meet the MDGs, the UN held a high-level plenary meeting of world leaders to review the progress, assess obstacles and gaps, and discuss strategies and actions to help meet the MDGs by the target date of 2015. 


The MDGs consist of eight major objectives that require the participation of developed and developing nations. They entail time-bound targets for addressing extreme poverty, hunger and disease, gender equality, education, education, and environmental sustainability. They also express basic human rights: the rights of everyone to good health, education, and shelter. The eighth goal, to build a global partnership for development, includes commitments in development assistance, debt relief, trade, and access to technologies. The MDGs are: eradicate extreme poverty and hunger;achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria, and other diseases; ensure environmental sustainability; and develop a global partnership for development.The UN established 

 to assess the progress on achieving the goals.

Following the conclusion of the MDG summit in late September, world leaders attending the summit adopted a global action plan to achieve the eight MDGs by the target date of 2015 and also announced specific initiatives in women’s and children’s health and other initiatives against poverty, hunger, and disease. Highlights are the strategic plan are outlined below  as specified by a Sept. 22, 2010 UN press release. 

Goal 1: eradicate extreme poverty and hunger


 • The World Bank will increase its support to agriculture to between $6 billion and $8 billion a year during  the next three years, up from $4.1 billion annually before 2008, under its Agriculture Action Plan to help boost incomes, employment, and food security in many low-income areas 
 • The Republic of Korea pledged $100 million to support food security and agriculture in developing countries 
 • Chile announced an Ethical Family Income initiative, to be launched in 2011, to supplement the income of the poorest families and those in the vulnerable middle class. 
 • Monster.com committed to expand access to job opportunities for rural youth in India by promoting access toRozgarduniya.com, an Internet job portal, in 40,000 villages across nine states in India.

Goal 2: Achieve universal primary education

 
 • Japan will provide $3.5 billion during five years for education in developing countries, beginning in 2011 
 • The World Bank will increase its zero-interest and grant investment in basic education by an additional $750 million, with a focus on the countries that are not on track to reach the educational MDGs by 2015, especially in sub-Saharan Africa 
 • Trinidad and Tobago committed to provide laptop computers to all secondary students within five years 
 • Dell committed to give $10 million toward education-technology initiatives this year.

Goal 3: Promote gender equality and empower Women

 
 • The Earth Institute, Ericsson, and Millennium Promise launched Connect To Learn, a nonprofit global education initiative to improve the access to and quality of secondary education for children around the world — especially girls. Connect To Learn provides three-year scholarships to attend secondary school and covers tuition, books, uniforms as well as access to broadband technology. The first 100 scholarships will be provided in Millennium Villages in Ghana and Tanzania within the next 100 days as of Sept. 22, 2010 
 • UPS International pledged $2 million to the World Association of Girl Guides and Girl Scouts to empower women through leadership and environmental- sustainability programs in 145 countries 
 • ExxonMobil committed $1 million in a partnership with Ashoka’s Changemakers, the International Council for Research on Women and Thunderbird Emerging Markets Laboratory to support technologies that help women increase their productivity and participate more effectively in the economy. The program is expected to directly benefit more than 13,500 people, with indirect benefits reaching more than 475,000 in the next two years.

Goal 4: Reduce child mortality and Goal 5: improve maternal health

 
 •  A commitment of $40 billion in resources was pledged for the Secretary-General’s Global Strategy for Women’s and Children’s Health 
 • Canada reaffirmed its commitment to mobilize more than $10 billion from G8 and non-G8 leaders, key donors and private foundations during the next five years through the Muskoka Initiative for maternal, newborn and child health 
 • LifeSpring Hospitals committed to provide an estimated 82,000 Indian women and their families with access to quality healthcare. Over the next five years, LifeSpring will increase the number of hospitals serving mothers and children throughout India from 9 to 200, which will improve standards of care and reduce maternal and childhood deaths.

Goal 6: Combat HIV/AIDS, Malaria and Other Diseases

 
 • France announced funding of $1.4 billion to the Global Fund to Fight AIDS, Tuberculosis and Malaria for 2011-2013 an increase of 20%, and additional funding was pledged by other sources in early October 
 • Japan announced a contribution of $800 million in the coming years to the Global Fund to Fight AIDS, TB and Malaria 
 • The United Kingdom announced a tripling in its financial contributions to fight malaria, increasing its funds for malaria from £150 million ($239 million) a year to £500 million ($797 million) by 2014 
 • China will, within the next three years will donate $14 million to the Global Fund to Fight AIDS, TB and Malaria 
 • The World Bank announced an increase in the scope of its results-based health programs by more than $600 million until 2015 to scale up essential health and nutrition services and strengthen the underlying health systems in 35 countries, particularly in East Asia, South Asia and sub-Saharan Africa 
 • Sumitomo Chemical committed to donate 400,000 of its antimalarial Olyset Nets to every Millennium Village from 2010-2011 following a previous donation in 2006 of 330,000 nets.

Goal 7: Ensure environmental sustainability

 
 • The United States announced a commitment of $51 million during the next five years for a Global Alliance for Clean Cookstoves, a public-private partnership led by the United Nations Foundation, that seeks to install 100 million clean-burning stoves in kitchens around the world 
 • Cameroon’s Energy Sector Development Program will double energy production by 2015 and triple it by 2020 
 • The Asian Development Bank plans to double its financing for clean energy to $2 billion a year by 2013 
 • WaterHealth International committed to build 75 water-purification plants in Bangladesh and expand its existing network of water-purification plants to an additional 100 villages in India, providing access to clean water for 175,000 people in underserved communities in Bangladesh and India. 
 • PepsiCo committed to ensure access to clean water for 3 million people around the world by 2015

Goal 8: Global Partnership for Development

 
 • The European Union offered funding amounting to €1 billion ($1.4 billion) to the most committed and needy countries to make progress on the goals they are furthest from achieving 
 • Belgium pledged €400,000 ($558,000) for the UN Conference on Least Developed Countries, to take place in Turkey in 2011 
 • China committed to give zero-tariff treatment to more products from least-developed countries and to continue to cancel debts. 

 President Barack Obama spoke at the MDG summit in New York last month, which outlined the US commitment to participate in achieving the MDGs and the importance of international development goals in global and national policy. “.Let’s put to rest the old myth that development is mere charity that does not serve our interest,” he said, according to a Sept. 22, 2010 White House press statement. “And let’s reject the cynicism that says certain countries are condemned to perpetual poverty, for the past half century has witnessed more gains in human development than anytime in history…My national security strategy recognizes development not only as a moral imperative but [as] a strategic and economic imperative.”

At the MDG summit, Obama announced the new US Global Development Policy, which he said is was the first such comprehensive policy by an American administration. “It’s rooted in the America’s enduring commitment to the dignity and potential of every human being. And it outlines our new approach and the new thinking that will guide our overall development efforts, including the plan that I promised last year and that my administration has delivered to pursue the Millennium Development Goals. Put simply, the United States is changing the way we do business.” 

This approach entails changing the way it defines development, to not only include the amount of money provided in international aid, but also using other tools such as diplomacy, trade, and investment policies, to help developing countries move from poverty to prosperity. This new approach also involves changing the view of the goal of development as a focus for long-term development and reducing the dependence of developing countries on aid. “Instead of just managing poverty, we have to offer nations and peoples a path out of poverty,” said Obama in the White House statement. He emphasized the use of the criteria specified by the US Agency for International Development for measuring the success of the MDGs such as the use of new and sustainable technologies, mutual accountability, and improved tracking of development outcomes. 

. As previously mentioned, at the UN MDG summit, several new initiatives in global health were announced. One such initiative is the Global Strategy for Women’s and Children’s Health. The strategy identifies the financing, policy changes, and interventions needed to meet key goals in improving the health and safety of women and children. The strategy aims to prevent, between 2011 and 2015, the deaths of more than 15 million children under the age of five, as well as 33 million unwanted pregnancies and the deaths of 740,000 women from complications related to pregnancy and childbirth. 

“The 21st century must and will be different for every woman and child,” said UN Secretary-General Ban Ki-moon, in a Sept. 22, 2010 press release. The global strategy involves a $40-billion commitment by the private sector, foundations, international organizations, civil society groups, and research groups. Several agencies, including the UN Children’s Fund (UNICEF), the UN Population Found (UNFPA), the Joint UN Program on HIV/AIDS (UNAIDS), the World Health Organization (WHO), and the World Bank are collaborating to mobilize ongoing political and operational support, including fighting for universal access to care for all women and children. In addition, the Bill and Melinda Gates Foundation, the Global Alliance for Vaccines and Immunizations (GAVI), and the Global Fund to Fight HIV/AIDs, Tuberculosis and Malaria are working with this team to ensure integrated services and efforts across a range of health needs. 

“This team will identify and connect resources to the people who need them based on the priorities set by countries in their national health plans,” according to the UN press release. “The Global Strategy asks us to be smart, strategic, and resourceful as never before,” said WHO Director-General Margaret Chan, in the UN press release. “By integrating their actions, the eight international-related health agencies will strengthen capacities across the board, in ways that meet the comprehensive needs of women and children.”

 Following the MDG summit, the UN released a report showing progress in improving access to HIV/AIDs services in 37 developing countries. The report, 

 was produced by WHO, UNICEF, and UNAIDS, and assesses progress in 144 low- and middle-income countries. The report’s findings showed that 5.25 million people had access to HIV treatment in low- and middle-income countries last year, accounting for 36% of those in need, an increase of 1.2 million people compared with 2008. In eastern and southern Africa, the regions most severely affected by HIV, treatment coverage increased from 32% to 41$ in one year, and half of all pregnant women were able to access HIV testing and counseling. In sub-Saharan Africa, close to one million people began antiretroviral treatment, resulting in 37% coverage of those in need. The rate in other regions included: Latin American and the Caribbean, 50%; East, South and Southeast Asia, 31%; Europe and Asia, 19%; and North Africa and the Middle East, 11%. Globally, a record 53% of pregnant women needing services to prevent mother-to-child transmissions received them. 

Despite the gains, the report also called attention to significant challenges in delivering universal access in most countries such as funding shortages, limited human resources, and weak procurement and supply-management systems for HIV drugs and diagnostics. The report called for a set of actions to be taken by the international community, consistent with the key strategies proposed in the new Global Health Sector Strategy for HIV/AIDS (2011-2015). WHO is developing the strategy, which is intended to guide the next phase of the health-sector response to HIV/AIDS once it is discussed and ratified by WHO’s World Health Assembly next year, according to a Sept. 28, 2010 UN press release. 

. In early October 2010, donor countries, private foundations, corporations, and individuals that met at the UN pledged more than $11.5 billion in new funding during the next three years for the global partnership to fight three killer diseases:  HIV/AIDS, tuberculosis, and malaria. 

“At a time when so many governments are tightening their belts, these commitments send a powerful message. It shows that many world leaders want to do the right thing beyond their borders, too,” said Secretary-General Ban Ki-moon, who chaired a two-day replenishment meeting for the Global Fund to Fight AIDS, TB and Malaria. “However, the demand for funding will outstrip even the important commitments made today. That means we must continue to mobilize more resources, more will, more quickly,” he noted at a at UN headquarters on Oct. 5, 2010 after the meeting concluded. “This work is not just about replenishing the fund; it is about replenishing hope and dignity in people’s lives,” he added. 

During the past eight years, the programs supported by the Global Fund have saved an estimated 5.7 million lives, provided AIDS treatment for 2.8 million people and TB treatment for 7 million people, and distributed 122 million bed nets to prevent malaria. 

The Global Fund was created in 2002 to scale up resources to fight HIV/AIDS, tuberculosis, and malaria. To date, the fund has committed $19.3 billion in 144 countries to support large-scale prevention, treatment and care program against the three diseases. 

While welcoming the pledges made, the Executive Director of the Global Fund, Michel Kazatchkine, noted that they are not enough to meet expected demand and to met the MDGs by their target deadlines, and additional public and private funding is needed.  

World leaders gathered at the United Nations last month to review the progress and map out a strategy for achieving the Millennium Development Goals.

World Leaders Map Strategy for Achieving Millennium Development Goals

Not so long ago, money flowed freely and drug development was relatively straightforward and proceeded at a leisurely and step-wise pace. Cost pressures and declines in research and development (R&D) productivity have changed the model. Wholesale restructuring of drug development that emphasizes time- and cost-savings and that kills unpromising compounds early is a sign of good management. This approach has engendered other responses such as the exploding volume of clinical trials in emerging markets and the growing reliance on contract research and development organizations (CROs and CDMOs) for key R&D functions.  

Some CROs and CDMOs view the restructuring of the R&D process as opportunity. They are trying to mimic pharmaceutical companies' in-house efforts by creating integrated service offerings by combining activities that traditionally have been provided separately (e.g., medicinal chemistry and toxicology or clinical supplies distribution with clinical packaging). We are calling these integrated service offerings "R&D mash-ups." "Mash-up" is a pop-culture term to describe an application or a derivative work that is constructed by combining multiple original sources such as websites that aggregate content.  

One area where we see mash-up pharmaceutical service offerings is the combination of late discovery services with preclinical toxicology. Late discovery is critical for identifying toxicology problems with drug candidates, and preclinical CROs are moving into that space, especially through acquisitions. For instance, Aptuit recently acquired GlaxoSmithKline's R&D site in Verona, Italy, giving it discovery toxicology capabilities that pair with its chemistry capabilities in the UK, the US, and India. 

A more aggressive move was the CRO Charles River Laboratories' $1.6 billion bid for Wuxi PharmaTech (Shanghai). Charles River hoped to pair its $500 million preclinical toxicology business with Wuxi's $270 million medicinal and process chemistry business to build a combined discovery/early-development offering. Charles River's shareholders recently rejected the deal as being too costly, but Wuxi, which opened a new 250,000-ft

  toxicology facility last year, is positioned to go it alone with a combined offering. 

Clinical supply logistics is another area for mash-up offerings. Traditionally, packaging, distribution, and local storage of clinical-trial materials (CTM) were three distinct service offerings. Clinical packagers handled the primary and secondary packaging, courier and parcel services got the supplies from the packager's loading dock to the clinical site or local storage depot, and clinical CROs provided the depot facilities. The expansion of clinical trials in emerging markets and the need to maintain the cold chain for bio/pharmaceuticals is leading to the integration of these previously separate activities and enhanced the role of courier services. Courier services now maintain their own network of supply depots, and at least one is about to open its own packaging operation. Traditional clinical packagers are also building their own depot networks. 

Drug engineering is another area for mash-up services in medicinal chemistry, solid-state chemistry, process chemistry, and materials science to resolve solubility problems for active pharmaceutical ingredients (API) that need some sort of engineering that changes their form (e.g., micronization or the combination with a polymer through a process such as hot- melt extrusion or spray drying). Where these drug-engineering capabilities will ultimately reside is not yet clear. We are starting to see competition emerge among API manufacturers, formulation CROs, dose manufacturers, and new companies specialized in materials science.  

Of course, not all mash-ups work out successfully. Before they got into linking late discovery and early development, some preclinical CROs thought there was a natural toxicology continuum from preclinical animal testing to Phase 1 first-in-man testing. Several CROs made some expensive acquisitions to increase their network of Phase I facilities and began promoting the combined offering. We haven't heard much about that combination lately, and the value proposition may not be there. 

Mash-ups must have a strong scientific or operational rationale to succeed. A successful mash-up strategy requires a lot of pieces to work well and together. If a CRO's toxicology capabilities are strong, but its medicinal chemistry know-how is weak, or if its project management and coordination are poor, it won't be able to deliver better drug candidates faster and cheaper.   

Mash-ups are potential game changers in the contract services industry and  have the opportunity to make a major contribution to improving the effectiveness and efficiency of drug R&D. But they entail much more than putting multiple services under a single brand. 

 is president of PharmSource Information Services, Inc., and publisher of 

Outsourcing

Changing demands in drug development lead to new service combinations and models.

R&D Mash-ups

, a division of Ortho-McNeil-Janssen Pharmaceuticals, a 

 (New Brunswick, NJ) company, opened a solar installation at its site in Titusville, New Jersey. The 4.1-megawatt solar photovoltaic array of 13,496 ground-mounted panels is estimated to generate enough energy to provide 70% of the site’s annual electricity needs, or roughly the amount needed to power 600 homes annually. The Titusville site, which hosts multiple Johnson & Johnson companies, broke ground on the array in April 2010.

In addition to the Titusville site, Johnson & Johnson has solar-power systems planned or completed at 20 sites worldwide, which together represent an installed capacity of about 13 megawatts. The Titusville campus is one of several Johnson & Johnson sites that are certified as Leadership in Energy & Environmental Design (LEED) sites. LEED is a green-certification system aimed at improving performance across key metrics such as energy savings, water efficiency, carbon-dioxide emissions reduction, improved indoor environmental quality, stewardship of resources and sensitivity to their impacts.

, a five-year, private-sector effort to improve the health of women and children in developing countries. The initiative supports the United Nations’ April 2010 call for a renewed effort to achieve the Millennium Development Goals of reducing mortality in women and children by 2015. 

 aims to help as many as 120 million women and children each year during the next five years. The effort includes treatments for intestinal worms, health information for pregnant women over existing mobile phones, research and development of new medicines for HIV and tuberculosis, and efforts focused on enhancing birth safety and improving health.

.’s (Whitehouse Station, NJ) Merck Institute for Science Education (MISE) was recognized by President Barack Obama as a model science education at an event held in September 2010 at the White House. Merck was recognized as part of the President's "Educate to Innovate" campaign, a nationwide effort focused on excellence in science, technology, engineering and math (STEM) education. Recognizing teachers as key to the learning process, MISE focuses on professional development programs that provide educators with research-based tools and strategies so they can improve all students' performance in science. A non-profit organization founded by Merck in 1993, MISE supports the capacity-building of partner school districts and the creation and sustainability of innovative classroom practices in science education.

Novartis (Basel, Switzerland) reported that scientists at the Novartis Institute for Tropical Diseases (NITD), in collaboration with researchers from the Genomics Institute of the Novartis Research Foundation (GNF), the Swiss Tropical and Public Health Institute, and The Scripps Research Institute have discovered a novel compound that shows promise as a next generation treatment for drug-resistant malaria. Major support for the project was provided by the Wellcome Trust, the Medicines for Malaria Venture (MMV), A*STAR, Singapore and the US government. The antimalarial candidate, spiroindolone NITD609, is effective against both strains of the malaria parasite, 

 in a malaria mouse model and showed pharmacological properties compatible with a once-daily dosing regimen. 

(New York) was recognized by the Carbon Disclosure Project (CDP) for its approach to addressing climate change by being named to the Carbon Disclosure Leadership Index. CDP is a not-for-profit coalition of 534 institutional investors with $64 trillion in assets under management.  This index, a key component of CDP's annual Standard and Poor’s (S&P) 500 report, highlights the constituent companies within the S&P 500 Index that have displayed the most professional approach to corporate governance with regard to climate-change disclosure practices. Companies are scored on their climate-change disclosure, and high scores indicate good internal data management and understanding of climate-change related issues affecting the company. Pfizer was ranked highest among the S&P 500 healthcare companies on the index — the third consecutive year that Pfizer made the S&P list—and ranked fourth on CDP's Global 500 healthcare-companies list. Pfizer exceeded its initial goal to reduce greenhouse-gas emissions by achieving a 43% reduction relative to revenue between 2000 and 2007. The company's second goal, to be achieved between 2007 and the end of 2012, is to cut greenhouse gases by 20% on an absolute basis.

A roundup of developments in corporate social responsibility and sustainability from the bio/pharmaceutical industry, its suppliers, and other public and private organizations.

PTSM: Pharmaceutical Technology Sourcing and Management-10-12-2010

Collaborative Innovation in Sourcing and Procurement

Roche Gains Top Spot in Sustainability Among Pharmaceutical Companies

World Leaders Map Strategy for Achieving Millennium Development Goals

R&D Mash-ups

CSR and Sustainability Forum